WEEK 6 BOARD ROOM REFLECTIVE SUMMARY- PATHWAYS

Introduction

The Marx family are crucially situated on determining how they will start their business project. As migrants from Belorussia, they are foreign to the traditions and
customs of the Australian culture. The family must consider innumerable factors concerning how to establish their project and achieve their dream. To launch a business
and make it as economically prosperous as possible they need to employ a suitable structure. Structures such as Bootstrapping and Mini-entreperurialship will fit their
mold as a business because they have minimal capital and do not want to acquire large loans where interest is associated with the risk of insolvency. The idea to focus
on liquidity reinvesting cash flows back into the business and to make the most of technological advancements such as internet with low costs is the best strategy for
the Marx family. Adopting these strategies will assist the Marx family overcome challenges such as cultural diversity and will get them closer to realizing their
dream. Although the family is sceptical about opposing the traditional family model they must realise it is in their best interests to expand with the inclusion of
shareholders.

Issues

• Identification of structures to employ and enable their project
• What ways can they start their business
• Challenging factors of life in a foreign city
• The lack of financial capital of the family
• Marketing strategies to implement for the business
• Conflicting personalities of the family and family hierarchy

Business formalities
Due to the family’s conflicting personalities (Schumpeter, 1934). Before any form of business is undertaken it is recommended that the family create a shareholder and
conflict agreement in the form of a constitution. This will allow each member to understand their role in the business and ensure that all the members have common
objectives for success. It is advised that the family create a conflict agreement that details future disputes that commonly occur around objectives, business
relationships, measure of success and evaluation of business progress (Dyer & Handler, 1994). This will allow the family to minimise potential barriers in business
dealings. These type of arrangements will define the role of each member and allow them to take control of their business (Hay & Smith, 1985). In addition the Marx
family should delegate themselves positions as directors to maintain a prominent role in the decision making of the business. Separating the members and directors
provides the Marx family with a platform to create a venture in the way they wish seeing out their own vision and ideas. It is also suggested that a member of the Marx
family, Groucho Marx, should have a greater leadership position such as the Managing Director or CEO to help settle conflict and have the final say on big business
decisions.

Bootstrapping
Bootstrapping is a means of starting up a new venture through creatively acquiring resources (Frederick, O’Connor and Kuratko 2012). This structure focuses on the cash
flow minimising loans where its start-up costs come from investments by family/friends etc. Since the Marx family are from overseas they do not have the luxury of
family and friends. Thus they must receive funds from outsiders to invest in the business and overcome their skepticism of strangers expanding beyond the family unit.
Offering a percentage of the business for capital creating shareholders is the best method for the Marx family. This has the advantage of no associated interest that
loans from the bank would incur minimising the insolvency risk.

Moreover, the family could form strategic relationships with an organisation or group of individuals potentially even a partnership which could assist in them adapting
to a foreign environment. It also has the benefit of shareholders offering different perspective on the direction of the business. This structure enables the business
to begin with a good base with the ability to expand gaining greater sales revenue and market share at a moderate pace (Bhide 1991). Aggressive overexpansion conflicts
this structure as it will likely lead to liquidity problems which is a high risk where worst case scenario the business cannot pay its debts. In addition, the Marx
Family should hold a dominant position in the business such as a managing director or CEO to have control over shareholders being prominent in decision making process
so they can see out their own vision. Although shareholders should have input in regular general meetings to give opposing perspective they should not have total
control over business decisions.

In addition, by adopting bootstrapping the Marx family must look for low hanging fruit which involves finding creative ways to generate cash at break even point with
little effort. This could involve finding the best way to sell a good or service. By budgeting accordingly it allows for expenses to be covered by operating cash
flows. Not only does it assist with liquidity but also allows the business to grow effectively and steadily. It also has the advantage for the Marx family to vet the
market the business enters before expansion. Although it is not a long-term strategy it does limit the financial risk of starting a new venture as it revolves around
keeping the business out of debt.

Mini-preneurship
After using bootstrapping, another pathway to launching their entrepreneurship career is online Mini-preneurship. Frederick, O’Connor and Kuratko define (2012), Mini-
preneurs as consumers who create, produce, and trade goods, services, and experiences. By using Mini-preneurship they would have to use the internet, thus this would
give them several advantages. Such as by using the internet to start up a business it does not require them a lot of money to start their business and also it does not
requires a lot of time to start up which is cost efficient. And since a lot of people are using the internet their business would reach to a lot of people and they
would get many responses from their business by the people. Not only that it would enable them to come up with more diverse idea by gaining feedback from their
employee through the internet. Although they may face some issues with Mini-preneurship as it relies on the internet to generate business. They must ensure that they
are aware of legal jurisdiction when using the internet in terms of advertising and privacy policies. As the internet is a global realm it is key to consider all legal
issues and not violate any security laws and regulations (Krige 1998).

Recommendations

• Ensure they have a shareholder agreement and conflict arrangement for business relations
• They should have regular board and general meetings in order to make sure that their objectives are well aligned between members and directors
• They should have a seminar with shareholders to convince them the potential of their business to invest in their business. This would let them able to gain
funding without any liabilities or interest.
• Bootstrapping
o Able to easily to achieve their objective without extra cost through low hanging fruit holding great emphasis on liquidity
o Highly creative acquisition enable them to attract customers easily because of curiosity
o Assists in forming relationships with outsiders helping to raise capital and offer different perspective on business opportunities
• Mini preneurship
o Able to set up business with little cost and at a short period of time.
o Able to reach many customers due to the popularity of using the internet such as social media websites such as facebook, twitter, snapchat and instagram

• They should not use franchise
o Franchise would oppose defined culture in a unit
o Takes away their family tradition which they want to introduce to Australia and their competitive advantage associated by being culturally diverse
o They may not have enough money to pay up the fees to the franchisor such as royalties.
• Partnership
o They could take up partnership with other companies, but however they are at risk of having their idea stolen from their partners. To prevent that they have to
be sure of what they agree on their partner which is time consuming and quite complex.

It is recommended that the Marx family should use bootstrapping as a business venture structure first to be able to sell a high creative product or service with a
focus on breaking even and hence liquidity. In addition they could also adopt mini preneurship which would allow the business to start up in a short period of time
with little cost. Franchising and partnership is not recommended as it they may not be able to pay for the expensive fee to gain the franchise and their ideas might be
stolen from their partners if they are not careful with their agreement. In order to get funding they should not go to a bank to get a loan because their loan due to
having no cash flow, instead they should convince shareholders to invest in their business in order to get funding with no liabilities and interest.

References

Bhide, A. (1991). Bootstrap finance: the art of start-ups. Harvard Business Review, 70(6), pp.109-117.

Biais, B. and Perotti, E. (2008). Entrepreneurs and new ideas. The RAND Journal of Economics, 39(4), pp.1105-1125.

Dyer, G. and Handler, W. (1994). Entrepreneurship and Family Business: Exploring the Connections. Entrepreneurship Theory and Practice, 19, pp.72-80.

Frederick, H., O’Connor, A. and Kuratko, D. (2012). Entrepreneurship: Theory, Process, Practice. 3rd ed. United Kingdom: Cenage Learning, pp.1-113.

Hay, R. and Smith, L. (1985). The unanimous shareholder agreement: A new device for shareholder control. Canadian Business Law Journal, 10, pp.440-452.

Krige, M. (1998). Using the internet for business purposes. The Law Journal library, 6, pp.70-72.
Moutinho, L., Ballantyne, R., and Rate, S. (Eds). (2011). Futurecast applied to tourism. In L. Moutinho (Ed.), Strategic Management in tourism. CAB International, 28.

Schumpeter, J. 1934. Theory of economic development. Cambridge, MA: Harvard University Press.
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